We have received many questions about the company LifeLock and their identity theft prevention services.  When we first saw their advertisement, we checked out their website.  It was very clear with a thorough explanation of their services and fees. 

And they do what every single person in America can do for themselves.  For free.

As we always emphasize to our clients, our seminar participants, and even our families, monitor your credit regularly!  It doesn’t cost anything but your time when you use the free annual credit reports you are entitled to.   Schedule it in your planner or on the family calendar.  Everyone gets three reports per year; check one from each credit bureau every four months for year-round monitoring.

LifeLock puts a fraud alert on each of their clients’ credit reports.  Fraud alerts are intended to be used by consumers that have experienced identity theft or whose personal information has been compromised.  Theoretically, a consumer with a fraud alert would be notified by any company that has been asked to lend that consumer money or open a credit account.  The lending company purchases the credit report to determine if they will or will not grant the loan and they see that there is a fraud alert which requires them to contact the person who the credit report is about and verify that it is really them.

Does it work that way?  We can only hope so as reports and statistics about this are few and far between.  The financial industry states that it could be very inconvenient for the consumer who has to wait to be approved for their loan due to the restrictions of the fraud alert.

One concern is that the credit bureaus, who have to pay for the time and expense to place the fraud alert on the credit reports, may enact some future rule or limitation that puts a stop to pre-emptive, continuous fraud alerts such as those that LifeLock is doing.  In fact, Experian, one of the three major credit reporting agencies (bureaus), filed a suit against LifeLock in February in California claiming that the company violates the Fair Credit Reporting Act by placing fraud alerts on behalf of consumers and then renewing them in perpetuity.

Another lawsuit has been filed in Arizona by a Maricopa County resident as a proposed class-action lawsuit claiming that the company is not legally allowed to perform the service it offers and the million-dollar guarantee they offer has so many limitations it is worthless. 

LifeLock does have an additional service that their adult, annual members can purchase for $25 a year per child under 16 years old.  They will check the child’s credit reports and place fraud alerts if warranted.  As we mentioned on March 21, 2008, you can check for a credit report under your child’s name and social security number with the free, annual credit reports.  If they are not available, that is usually a good sign that their information has not been misused.  Mark it on the calendar and do this yourself every six months.

BOTTOM LINE: Save your money, be pro-active and commit to including credit report monitoring as part of your financial fitness routine.